MakeMyTrip boards ibibo, to lead market

By Ajay Modi & Aneesh Phadnis , Business Standard, New Delhi/Mumbai | In Digital | October 19, 2016
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Buyer's shares soar 54% to $31.4 on Nasdaq.

Leading domestic online travel portal MakeMyTrip, a Nasdaq-listed firm, on Tuesday announced the acquisition of rival ibibo, in one of the largest consolidations in the space.

The deal size is estimated over $500 million (about Rs 3,400 crore). It was an all-stock deal.

The two together will capture close to half of the domestic online hotel bookings and will dominate the online air ticketing space.

The deal, expected to be completed by December, will need to get the go-ahead of the Competition Commission of India (CCI), the fair trade watchdog.

While MakeMyTrip is the country's biggest online air ticketing and hotel booking company, ibibo is a close second in the online hotel booking space. It's market share in online air ticket segment is not known.

When taken together, in the financial year 2015-16, MakeMyTrip and ibibo did 34 million transactions, of which 50 per cent came from redBus, the country's biggest online bus booking platform, which ibibo had acquired in 2013.

The combined entity of MakeMyTrip and ibibo will now compete against Yatra, Cleartrip and Expedia. The different platforms in the combined entity - MakeMytrip, Rightstay, ibibo, redBus and Ryde - will be retained.

The gain for MakeMyTrip will be it now gets to expand its air and hotel booking and also enter bus booking through redbus and taxi-booking through Ryde, which is also a part of ibibo.

Analysts said after this deal, MakeMyTrip and ibibo jointly will be in a better position to bargain for margins with airlines and hotels.

Following the transaction, MakeMyTrip will own 100 per cent of the ibibo group. However, Naspers, which is ibibo's majority shareholder, will own 40 per cent stake in MakeMyTrip, becoming its single largest shareholder.

Accordingly, Naspers will contribute proportionate working capital upon the closing of the transaction.

Financials of the deal were not announced.

MakeMyTrip's market capitalisation hit a high of $1.3 billion on Nasdaq, putting the value of Nasper's holding at approximately $520 million. Ctrip, which invested $180 million in MakeMyTrip in January, will have a 10 per cent share.

Jointly owned by Johannesburg Stock Exchange-listed internet firm Naspers (91 per cent) and Chinese investment company Tencent (nine per cent), ibibo got $250 million from the former early this year.

Naspers and Tencent are selling their entire stake in ibibo to MakeMyTrip.

The domestic online travel space has seen a series of action this calendar year. In January, MakeMyTrip raised $180 million from Chinese travel major Ctrip to grow the hotel business.

The transaction is expected to unlock value for stakeholders by combining the complementary strengths of each business.

MakeMyTrip brings its strong brand, robust mix of domestic and outbound hotels and packages business and strong position in the air ticketing business, according to analysts. The ibibo group, via its brand goibibo and redBus, comes with a strong presence in various fast growing travel segments including hotels, bus bookings and air ticketing, MakeMyTrip said.

Deep Kalra, group CEO and executive chairman, MakeMyTrip, said in an investors' call that there is a huge growth opportunity in most verticals except air ticketing where already almost 50 per cent of the bookings happen online. "The penetration level in online branded hotel booking is just 15 per cent. There is an inherent strength in all the brands and there are core loyal users. We will play to the advantage of each of these".

Following the closing of the proposed transaction, founder Deep Kalra will remain group CEO and executive chairman of MakeMyTrip and co-founder Rajesh Magow will continue to remain CEO India of MakeMyTrip. Founder and CEO of the ibibo group, Ashish Kashyap, will join MakeMyTrip's executive team as a co-founder and president of the organisation.

Morgan Stanley is the exclusive financial advisor to MakeMyTrip and has also provided a fairness opinion to the board of MakeMyTrip. Latham and Watkins, S&R Associates and Appleby are legal advisors to MakeMyTrip. Goldman Sachs is the exclusive financial advisor to ibibo and Naspers, while Cravath, Swaine & Moore, Trilegal and BLC Roberts are its legal advisors for the deal.

The online booking segment has seen a number of deals this year

January:, China's largest travel site, purchased stake in MakeMyTrip
Deal size: $180 million

February: South African internet and media company Naspers invested in ibibo.
Deal size: $250 million

July: Yatra announced a merger with Nasdaq-listed American company Terrapin 3 Acquisition Corporation (TRTL).
Deal size: $218 million

October: MakeMyTrip acquires ibibo to form India's biggest online travel company*
*Deal size not revealed

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